Fundamentals of Strategic Advantage and Competitive Strategy Concepts

Fundamentals of Strategic Advantage

Information systems must be viewed as more than a set of technologies that support efficient business operations, workgroup and enterprise collaboration, or effective business decision-making. Information technology can change the way businesses compete.

For this reason, one should view information systems strategically, that is, as vital competitive networks, as a means of organizational renewal, and as a necessary investment in technologies that help a company adopt strategies and business processes that enable it to reengineer or reinvent itself in order to survive and succeed in today’s dynamic e-business environment.

Competitive Strategy Concepts

The strategic role of information systems involves using information technology to develop products, services, and capabilities that give company major advantages over the competitive forces it faces in the global marketplace.

This creates strategic information systems, information systems that support or shape the competitive position and strategies of an e-business enterprise. So a strategic information system can be any kind of information system (TPS, MIS, DSS, etc.) that helps an organization

Gain a competitive advantage

Reduce a competitive disadvantage

Meet other strategic enterprise objective

Strategic uses of IT

How can the preceding competitive strategy concepts be applied to the strategic role of information systems?

Information technology can be used to implement a variety of competitive strategies. These include the five basic competitive strategies (differentiation, cost, innovation, growth, and alliance), as well as other ways that companies can use information systems strategically to gain a competitive edge. For example

Lower Costs

Differentiate

Innovate

Promote Growth

Develop Alliances

Several key strategies that are implemented with information technology include

Locking in Customers or Suppliers

Building valuable relationships with customers and suppliers, which deter them from abandoning a firm for its competitors or intimidating it into accepting less profitable relationships.

Building Switching Costs

The costs in time, money, effort, and inconvenience that it would take a customer or supplier to switch its business to a firm’s competitors.

Raising Barriers to Entry

Technological, financial, or legal requirements that deter firms from entering an industry.

Leveraging Investment in Information Technology

Developing new products and services that would not be possible without a strong IT capability

Globalization

IT has not only brought the world closer together, but it has allowed the world’s economy to become a single interdependent system. This means that we can not only share information quickly and efficiently, but we can also bring down barriers of linguistic and geographic boundaries.

The world has developed into a global village due to the help of information technology allowing countries like Chile and Japan who are not only separated by distance but also by language to shares ideas and information with each other.

Communication

With the help of information technology, communication has also become cheaper, quicker, and more efficient. We can now communicate with anyone around the globe by simply text messaging them or sending them an email for an almost instantaneous response.

The internet has also opened up face to face direct communication from different parts of the world thanks to the helps of video conferencing.

Cost Effectiveness

Information technology has helped to computerize the business process thus streamlining businesses to make them extremely cost effective money making machines. This in turn increases productivity which ultimately gives rise to profits that means better pay and less strenuous working conditions.

Bridging the Cultural Gap

Information technology has helped to bridge the cultural gap by helping people from different cultures to communicate with one another, and allow for the exchange of views and ideas, thus increasing awareness and reducing prejudice.